Setting up a glass processing plant. In a Bursa announcement on July 6, 2009, LTKM said it would be diversifying its core business in the poultry industry to processed glass (Lumiglass) with an initial investment of RM15m, which includes the cost of machinery, equipment, warehousing facility and general plant refurbishment. LTKM will manufacture four types of processed glass namely tempered, laminated, double glazing and various security glass. The glass processing plant will be located in Sungai Rasah, Klang and will take 9 months to complete. As such, the plant will only be fully operational in early 2010. Soothing concerns. To get a better understanding of the new business, we visited LTKM on Friday, July 17, ‘09 and sought management clarification on the new glass venture, Lumiglass SB. Management believes architectural glass offers a timely opportunity and is fast being used in the building and construction as well as other industries due to the heat-resistant, heat-insulation, security and crime-prevention features of glass. Lumiglass will be in full production by end-2010. It will start manufacturing tempered and laminated glass in March 2010 followed by crime prevention security glass (via subsidiary, Lumi Secuglass SB) in August 2010 after obtaining certification. Lumiglass will be involved only in double glazing and solar glass later on.
Industry experts oversee production. LTKM has hired a group of experienced personnel to help manage Lumiglass. Mr. Mohan Menon who has approximately 30 years of experience in the industry, was put in charge of production. Mohan, who was also involved in the development of the patented Armorglass, worked in NSG (Nippon Sheet Glass) for several years. Nippon Sheet Glass is one of the four most prominent glass manufacturers in the world. He was recruited by Lumiglass for his knowledge in developing the lamination technology to polycarbonate with the interlayer of PU resin and EVA lamination, which is a better alternative to ordinary glass and glass lamination. Mohan is also seeking to patent his glass technology with Lumiglass. Meanwhile, Mr. Alexander Akguel will be responsible for the development, design, operation, and improvement of Lumiglass’ production systems. He has been in the industry for 25 years, starting from being a glassproduction operator to a general manager in Germany to setting up one of the most advanced glass factories in Dubai. With such experts to ensure smooth operation and production efficiency, we believe the new venture may hold potential growth for LTKM in the long term.
Technology to bring LTKM forward. As there are only a few glass players in Malaysia, Lumiglass may be able to capture market share by employing state-of-the-art technology from glass processing pioneer Glaston Finland. LTKM will buy glass processing machines from Glaston, which will also provide the after sales services as well as software to allow for full integration of the entire production process, from inter-operability of machines to controlling materials and workflow, and managing sales. This is aimed at optimising the entire production process.
Innovative products. Lumiglass also has the technology to the manufacture crime prevention security glass, which is more competitive than products such as PVB films, PU film and Acrylic sheet due to its lighter, thinner and clearer glass features. As tempered glass commands a high gross profit margin of approximately 70%-80%, we reckon that this venture may be rewarding for LTKM as a group should the venture be successful.
Workers may not cope with advanced technology. Although Lumiglass will be adopting one of the advanced technologies in glass making, there is a concern as to whether its workers would be able to cope with the new technology. As the existing industry players are currently not using the latest technology employed by Lumiglass, the workers may take time to relearn the new technology. It is hoped that the expertise employed by Lumiglass will be able to smoothen the process given their experience in Germany and Dubai. Capturing a sizeable market. As Lumiglass is still new in the market, there may be concerns with regard to its ability to capture a sizeable market share. Most of the industry players already have a network of contacts to keep their job flowing. Hence, we believe it is important for Lumiglass to establish a good relationship with potential clients, i.e. architects, contractors or developers. Nonetheless, we believe this should not be a problem given that Lumiglass’ managers, with their industry experience, would have a network of their own. Furthermore, as management has assured, the glass industry is large enough to absorb all the market players as they will form strategic alliances among themselves in order to benefit from the overall glass market. Risks noted and mitigating action put into place. Although we have noted two key risks, management has put in place the right technical know-how and on-the-ground experience by Mohan Menon and Alex Akguel as well as Mr. Michael Tan’s passion and effort to ensure the success of the new venture.
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